Morning Bid: Bonds boil

• U.S. 10-year Treasury yields reached 4.8%, nearing the 5% level that poses significant challenges for equity valuations in mixed asset portfolios
• New Zealand's Reserve Bank delivered its second consecutive rate hike, becoming the first major central bank to act this month, with Fed officials including Michael Barr signaling September rate increases may be necessary
• Rising oil and natural gas prices (European gas at highest since 2023) are intensifying fiscal pressures for governments facing budget deadlines and elections, including Germany's state elections and U.S. midterms in two months

Market Summary: Bond Selloff Intensifies Amid Energy Surge and Rate Hike Expectations

Key Developments:

Global bond markets are experiencing a significant selloff as escalating conflict in Iran drives energy prices higher and investors brace for multiple central bank rate hikes in September. U.S. 10-year Treasury yields hit their peak on Wednesday at 4.8%, approaching the critical 5% threshold that portfolio managers view as challenging for equities.

Central Bank Actions:

Multiple central banks are poised to raise rates this month, including the Federal Reserve, European Central Bank, and Bank of Japan. New Zealand's Reserve Bank led the way with its second consecutive rate increase on Wednesday. Fed board member Michael Barr indicated a September rate hike may be necessary, echoing similar comments from Fed Chair Kevin Warsh last week.

Energy Market Impact:

Crude oil and natural gas prices are surging, with oil stalking its highest level since July and European natural gas benchmarks reaching their highest point since 2023. This spike adds budgetary and political pressure as winter approaches with no resolution to the Iran conflict in sight.

Political Context:

The energy crisis creates challenges ahead of critical events: Britain and France face annual budget preparations, Germany has three state elections in September, and U.S. midterm elections are two months away.

Corporate News:

The AI boom continues, with unnamed companies beating earnings estimates overnight. Broadcom earnings are scheduled for later today.

Market Focus:

Attention now shifts to U.S. labor market data this week, though inflation remains the Fed's primary concern. Rising borrowing costs are pressuring both stocks and bonds globally.